Emerging Markets
Emerging markets encompass regions with significantly diverging fundamentals and a broad range of credit challenges—from persistent inflation and tightening financing conditions to sluggish domestic demand and geopolitical tensions.
How We Rate Emerging and Frontier Markets
Emerging and frontier markets are strategically positioned to drive global economic growth through the expansion of their domestic markets.
Emerging and frontier markets will play a crucial role in shaping the global economy and driving growth, contributing approximately 65% of global economic growth by 2035. Frontier markets will play a prominent role in this growth due to their favorable demographics—but face significant challenges from persistently high inflation and political uncertainty.
Monthly Highlights
Resilience Through Choppy Waters
We expect the Fed's September hike to reinforce upward pressure on policy rates in those emerging market (EM) where inflation exceeds targets. This is particularly the case for large net energy importers, as higher oil prices lift inflation expectations.
Strong tech exports are supporting EM Asia's trade and manufacturing. They are offsetting higher energy prices, tighter policy rates, and global volatility. More than one-third of exports from Malaysia, Vietnam, Thailand, and the Philippines consist of tech-related goods.
Despite the pickup in inflation, growth has remained broadly resilient across EM EMEA. The increase in prices has generally been less severe than previously expected, and domestic demand dynamics have remained robust.
EM sovereign yields broadly moved higher with the U.S. rates, although dispersion was significant, with Colombia up 65 basis points (bps) and Türkiye down 57 bps. Corporate spreads tightened across regions, signaling resilient demand. Meanwhile, EM (excluding China) issuance slowed to $11.2 billion from $217 billion in China.
Credit quality is stable with no downgrades in August, led by upgrades of China Minmetals Corp., H&H International Holdings Ltd., and Corporacion InmobiliariaVesta. However, negative bias remains concentrated in cyclical sectors (chemicals, packaging, and environmental services [CP&ES; 38%], automotive [33%]) and LatAm, where it rose to 16.3% following outlook revisions on three entities.
Latin America
September 8, 2026
Digital Banking And AI In Mexico: Greater Inclusion, Stronger Efficiency, And Gradual Disruption
Digital banking is gradually increasing financial inclusion in Mexico, where the large informal sector and other barriers have historically impeded broader banking adoption.
Digital capabilities and AI tools are also enhancing operational efficiency and risk management for the Mexican banking industry.
We view these developments less as disruptive threats to traditional banks and more as powerful enablers of a gradual structural transformation in the country.
EM EMEA
September 24, 2026
Credit Conditions & Outlook Europe Q4 2026: Solid Demand, Slimmer Buffers
Overall: Credit performance remains resilient thanks to healthy earnings, liquidity, and generally conservative financial policies. However, the financial and policy cushions that helped absorb recent shocks are becoming thinner.
Risks: Higher real interest rates, persistent energy-related inflation pressures, and growing geopolitical uncertainty are becoming ever-more interconnected, increasing the potential for tighter financial conditions and sharper risk repricing.
Ratings: Ratings pressure remains concentrated among lower-rated, highly leveraged, and structurally challenged borrowers, while stronger issuers continue to benefit from financial flexibility and market access. Credit differentiation is likely to increase rather than broaden into systemic stress.
EM Asia-Pacific
Credit Conditions
September 24, 2026
Credit Conditions & Outlook Asia-Pacific Q4 2026: Compounding Risks, Amplified Effects
Asia-Pacific's credit conditions remain supportive on resilient growth, functioning financing channels, and AI-linked export demand that is fueling tech-oriented economies.
But credit cushions are thinning on energy disruption, weaker currencies, potentially higher funding costs, and fiscal strains. • Rising government bond yields, elevated leverage, and competing sovereign and AIrelated funding needs could squeeze weaker borrowers into 2027.
AI concentration risk, China's domestic slowdown, climate shocks, cyber costs, and policy/geopolitical shifts point to wider credit dispersion.
Frontier Markets
Emerging Markets
July 29, 2026
African Markets Quarterly Highlights: Resilient Ratings, Rising Risks
Triple threat to Africa (inflation, growth, and financing) remains in place: Rising diesel, gasoline, and shipping fuel costs are weakening fuel demand across most markets, while inflation in countries such as Ghana and Mozambique is approaching growth-sensitive levels. A strong El Niño climate pattern could further amplify food-price pressures.
The energy price shock is widening policy and credit divergence across Africa. Southern Africa has absorbed some of the region's largest fuel-price increases, while subsidy regimes in the Economic and Monetary Community of Central Africa (CEMAC) and Angola have limited the household impact at the expense of higher fiscal burdens.
External liquidity risks vary widely across Africa, reflecting differences in both financing needs and reserve buffers. While reserve pooling supports resilience in WAEMU and CEMAC, CEMAC remains more exposed to external shocks due to its heavier reliance on hydrocarbon exports.
External financing conditions have stayed mostly supportive. African sovereign U.S. dollar yields edged up only modestly to around 8.0% from mid-June lows despite broader inflation pressures. Yet growing divergence in localcurrency yields, led by Egypt (+258 basis points [bps]), Nigeria (+190 bps), and Ghana (+93 bps), points to increasingly differentiated domestic funding conditions.
Sovereign ratings remain resilient, with African reforms and steady financing conditions sustaining positive momentum despite the Middle East war, illustrated by our recent upgrade of Nigeria to ‘B’ on the back of its improving macroeconomic profile.